The long-term viability of the so-called pensions triple lock has been brought into focus.
Finance expert Mark Pemberthy, from consulting firm Gallagher, has warned the policy may soon have to be altered as the cost of the state pension ramps up for the Government.
He said: “As the cost of the state pension continues to rise, it’s clear that maintaining the triple lock in its current form is becoming increasingly difficult as pressure on the system intensifies.”
The latest DWP figures show there were 12.9 million people receiving the state pension at May 2024, an increase of 220,000 on May 2023.
The cost of the state pension will jump up in April next year, when payments will increase 4.1 percent, raising the full new state pension from £221.20 a week to £230.30 a week.
Despite the growing financial burden of the policy, Mr Pemberthy said there is no clear indication for now that the metric will change.
He said: “There is no sign of the triple lock being removed in the near future. It’s a difficult balancing act – we must balance the affordability challenges of the state pension with the pressing need to adequately support pensioners in retirement.
“To ensure long-term sustainability, we need a robust long term review of the state pension and other related solutions such as boosting workplace pension savings through auto-enrolment, to ensure people can enjoy retirement without placing unrealistic burdens on future generations.”
Labour has committed to keeping the triple lock for this Parliament, with ministers stating this will increase some payments of the new state pension by around £1,700 over the next five years.
Another option the Government has to try to keep the state pension affordable is to increase the state pension age.
This is already timetabled to go up from the current 66 to 67 between 2026 and 2028, and then to increase from 67 to 68 between 2044 and 2046.
There have been reports the Government is considering bringing forward the timing for the move from 67 to 68.
A decision about changing the state pension age increase is due to come out from the Government during the first two years of this Parliament.
Looking at the latest figures, the average new state pension payout for men is £209.49 a week while women get on average £205 a week.
Men on the basic state pension get on average £217.15 a week while women get £186.03 a week.
If you are thinking of paying voluntary National Insurance contributions to increase your state pension, now is a good time to do so.
You can currently top up as far as the 2006/2007 tax year rather than up to six years ago, and this extended top-up period will only be on offer until April 2025.
